Neogen Profit Jumps 27 Percent

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Neogen Corp. (Nasdaq: NEOG), the Lansing-based biotech firm, reported a 27 percent increase in net income for the third fiscal quarter ended Feb. 28 from year-earlier levels — to $4.9 milllion or 21 cents a share, from $3.9 million or 17 cents a share a year earlier.

Third quarter revenue rose 25 percent to $42.2 million, a record third quarter for the 28-year-old company, compared to the prior year’s $33.8 million.

For the year to date, net income is up 31 percent to $16.9 million or 71 cents a share, from last year’s $12.9 million or 56 cents a share. Year to date revenue was $129.1 million, up 27 percent from $101.4 million a year earlier.

“We are very pleased to report our solid third quarter results, especially when considering the comparison to our outstanding third quarter performance last fiscal year,” said James Herbert, Neogen’s chairman and CEO. “The fact that we are reporting a significant revenue increase this quarter is a testimony to the diversified nature of Neogen’s products, our synergistic acquisition strategy, and our international expansion.”

The third quarter was the 72nd consecutive profitable quarter from operations for the company, and the 76th out of the past 81 quarters to show increased revenues as compared with the previous year — including the last 24 consecutive quarters.

“Our strong third quarter growth was a mix of the accretive GeneSeek acquisition and solid same-store sales increases,” said Lon Bohannon, Neogen’s president and COO. “On the animal safety side, our comprehensive biosecurity marketing effort continues to gain traction as we achieved significant increases in sales of rodenticides, cleaners and disinfectants. We see these products as natural complements to our diagnostics, and as integral components in our overall mission to provide the best available food and animal safety solutions. On the food safety side, our recent internally developed or enhanced diagnostics for dairy antibiotics, foodborne pathogens, and sanitation monitoring all experienced substantial increases in the third quarter.”

The company has maintained a strong cash flow during the year and now has more than $47 million in cash and investments to pursue its growth strategies. Meanwhile, cost control efforts resulted in a decline in operating expenses as a percentage of revenue to 29.7 percent in the third quarter, vs. 34.6 percent a year earlier.

Neogen’s Animal Safety Division led the company’s third quarter revenue increase, with sales up 53 percent to $21.6 million from $14.1 mllion a year earlier. For the first nine months of the fiscal year, the division’s sales increased 42 percent over the prior year to $64.9 million. The April 2010 acquisition of GeneSeek contributed to the division’s revenue increase, as the commercial agricultural genetics laboratory continued to exceed internal revenue expectations in its first year under Neogen’s ownership. Year to date, the overall Animal Safety Division has recorded organic growth of 10 percent compared to the prior year.

Sales of Neogen’s extensive line of agricultural cleaners and disinfectants substantially increased in the quarter, led by improving sales into livestock production markets in Central and South America, Asia, and Canada. Neogen’s line of BioSentry biosecurity products and the line of DuPont products distributed by Neogen experienced significant sales increases. A successful sales program helped spur Neogen’s rodenticide sales to levels well in excess of prior year quarterly figures. The company’s Animal Safety Division also had large increases in its sales of life science diagnostics and veterinary instruments.

Despite a difficult comparison with the exceptional performance of the prior year’s third quarter, the Lansing, Mich.-based Food Safety Division’s third quarter revenues increased to $20.6 million in the quarter from $19.7 million a year earlier. In the third quarter of the previous fiscal year, sales of Neogen’s food safety diagnostics spiked as the company helped corn producers and processors address a widespread vomitoxin outbreak in the United States. In the third quarter of the current year, Neogen’s sales of vomitoxin kits returned to pre-outbreak levels as the corn crop has returned to its more normal, relatively clean condition. For the first nine months of the fiscal year, the division’s sales increased 15 percent over the prior year to $64.2 mllion.

The growth for the Food Safety Division was broad-based across multiple market segments and product lines for the quarter and on a year-to-date basis. Sales of capital equipment and disposable vials associated with Neogen’s Soleris® general microbial detection system exhibited strong growth in the quarter. The Soleris system allows for the accurate detection of spoilage organisms, such as yeast and mold, in much less time than traditional methods.

Scotland-based Neogen Europe continued to experience strong growth, up 16 percent in the quarter, as Neogen’s food safety products furthered market share gains throughout the European Union. The company’s Mexican subsidiary recorded an 87 percent sales increase compared to the prior year quarter, and Neogen’s new subsidiary in Brazil also experienced strong revenue growth in the quarter.

Neogen’s enhanced Reveal line of tests for foodborne pathogens, including Salmonella, Listeria, and E. coli O157:H7, continued its sales growth, with each test recording sizable sales increases in the quarter. Sales of Neogen’s enhanced BetaStar test to detect antibiotic residues in milk continued their rapid increase.